Really Gassed Right Now

It was all fun and games until January 2021 came around and the average gas price across the US started to rise. In fact, as of March 8th, the average gasoline price is sitting as $2.771 per gallon - which when compared to prices a year ago is a $0.396 increase. That is almost a 40 cent increase, which does not sound like a lot until you fill up the 20 gallon tank of your little hybrid car for a total of a $7.92 increase.

So, why have the prices gone up? There are a number of factors that go into the price of gasoline. You may remember from one of our previous blog posts that one of the many factors that controls gas prices is Organization of the Petroleum Exporting Countries (OPEC). As a reminder, OPEC (which consists of 13 oil producing countries) controls the oil costs as well as the rates of oil production. In addition to OPEC raising the price of crude oil, Russia has decided once again to not "play ball" with OPEC and refuses to increase oil production despite the increase in need for oil. With rising demand and supply staying stagnant, it is looking like it is going to get uglier for all processes using oil before it gets better.

Keep in mind, some of the increase is due to some regularly scheduled activity. Going into the spring season, there comes a point where the refineries have to switch to producing the summer blends of gas. The switch to the summer blends of gasoline are what cause the hike in gas price until the temperatures start to cool off again in the fall. That sounds a bit weird, but the summer blends are more expensive to produce because they reduce evaporation. The reduced evaporation blend is especially helpful in places that reach over 100 degrees Fahrenheit during the summer months. Of course with the switch to the summer gasoline blend, scheduled maintenance has to occur as well. Between these planned and unplanned cost increases, it is looking like Americans can expect to be paying more than $3.00 per gallon for gasoline within the next 6 months if these trends continue.

Remember that crude oil is not just used for fuel; oil is also involved in other processes such as the generation of plastic products, some wax products, insecticides, synthetic rubbers, and fuels such as kerosene or butane. Prices of products containing or formed from crude oil have not gone up yet, but it would not be surprising if the prices of these items start to raise as well - especially if Russia and Saudi Arabia cut oil production more than they already have.